A04 Intermediate Accounting I
Directions: Be sure to make an electronic copy of your answer before submitting it to Ashworth College for grading. Unless otherwise stated, answer in complete sentences, and be sure to use correct English spelling and grammar. Sources must be cited in APA format. Refer to the “Assignment Format” page for specific format requirements.
Part A (30 points)
The Bravo Company manufactures a single product. On December 31, 2012 Bravo adopted the dollar-value LIFO inventory method. The inventory on that date using the dollar-value LIFO inventory method was determined to be $500,000. Inventory data for succeeding years are as follows:
Year Ended December 31 Inventory at Respective Year-end Prices Relevant Price Index (Base Year 2012)
2012 $500,000 1.00
2013 527,000 1.08
2014 635,000 1.15
2015 645,000 1.21
Compute the inventory amount at December 31, 2013, 2014, and 2015 using the dollar-value LIFO inventory method for each year. (Round all amounts to the nearest dollar, 10 points each)
Part B (40 points)
Information from Hope Company’s records for the year ended December 31, 2015 is available as follows:
Net sales $2,800,000
Cost of goods manufactured:
Units manufactured 70,000
Units sold 60,000
Finished goods inventory, 1/1/2015 $0
Hope had no work-in-process inventories at either the beginning or end of 2015.
a. What would be Hope’s finished goods inventory cost under the variable (direct) costing method at December 31, 2015? (20 points)
b. What would Hope’s operating income be under the absorption costing method? (20 points)
Part C (30 points, 10 each)
Tool City, Inc. had 300 cordless screwdrivers on hand at January 1, 2015 costing $45 each. Purchases and sales of cordless screwdrivers during the month of January were as follows:
Date Purchases Sales
January 9 200 @ $75
January 14 100 @ $47
January 23 75 @ $76
January 25 100 @ $48
January 30 75 @ $77
Tool City does not maintain perpetual inventory records. According to a physical count, 150 cordless screwdrivers were on hand at January 31, 2015.
a. What is the cost of the inventory at January 31, 2015 under the FIFO method?
b. What is the cost of the inventory at January 31, 2015 under the LIFO method?
c. What is the cost of the inventory at January 31, 2015 under the FIFO method if only 145 cordless screwdrivers were on hand at the time of the physical count?